German policy makers are relying on a policy mix made up of ambitious
targets, technology-push, demand-pull and systemic instruments to increase the
share of renewable energy technologies and to foster the German Energiewende.
The impact on innovation resulting from this mix was analyzed in the research
project "GRETCHEN", which was funded by the German Federal Ministry
of Education and Research (BMBF), and jointly conducted by the Fraunhofer Institute
for Systems and Innovation Research ISI, the Friedrich Schiller University (FSU)
Jena and the Institute of Economic Structures Research (GWS) Osnabrück. The results
indicate that rapid technological change has taken place in renewable energies over
the last few decades. The consistency and credibility of the policy mix played
a key role here. More recently, however, this green change in Germany has shown
signs of slowing down.

There is a specific focus on developing new energy technologies and
improving existing ones in light of the German Energiewende and globally ambitious climate targets. These green
innovations should help to meet targets like the limitation of global
temperature rise to two degrees Celsius, or an 80 percent share of renewable
energies in Germany’s gross electricity generation by 2050. Over time, several policy
instruments have been introduced to implement these ambitious energy and
climate policy objectives. These include demand-pull instruments like the
German Renewable Energy Sources Act (EEG), technology-push ones such as energy
research programs, and systemic measures such as collaborative research
projects aimed at connecting different actors and promoting knowledge exchange.
With regard to the interaction of the different policy instruments, in the
GRETCHEN project, the Fraunhofer ISI together with the FSU Jena and the GWS
Osnabrück analyzed this policy mix’s impacts on innovation in renewable energy
technologies in Germany.

The results of the GRETCHEN project
show that rapid technological progress in renewable power generation
technologies has taken place in Germany over the last few decades. This is
indicated by the strong increase in scientific publications in photovoltaics,
or the rise in the number of patent applications in wind power and
photovoltaics. Professor Uwe Cantner from the Friedrich Schiller University
Jena also highlights "that the intensified knowledge exchange among
different actors in the innovation system and the sharp drop in technology
costs are other indications of the policy mix’s positive impact on innovation“.
As a result, the majority of German manufacturers of renewable energy
technologies were able to develop new export markets which in turn had a
positive effect on macroeconomic development and employment. However, the
innovation dynamics are currently showing signs of slowing down in Germany. In
addition, fast-paced technology catch-up is taking place in Asian countries, in
particular. For Germany to continue to be ranked among the world's green
technological leaders, these warning signals should be taken seriously and the
necessary adjustments made to the policy mix.

The project team’s analyses
make it clear that technology-push, demand-pull and systemic instruments each
have a clear impact on green change in the technologies regarded. Examining the
policy mix as a whole additionally shows that the various instruments mutually reinforce
each other’s positive influence on innovation. The GRETCHEN analyses indicate the
central role played by demand-pull measures in the instrument mix. Depending on
technology-specific learning potentials, the resulting positive impacts on
green innovation can trigger a self-reinforcing process of cost reduction and
expansion of renewable energies that helps to overcome current path
dependencies in the energy system. Dr. Karoline Rogge, coordinator of the
GRETCHEN project at the Fraunhofer ISI and Lecturer in Energy Policy and
Sustainability at the University of Sussex, also emphasizes the high relevance
of the credibility of political support as a driver of innovation in green electricity
generation technologies: "Our GRETCHEN survey of technology manufacturers
based in Germany shows that the credibility of the policy mix plays a decisive role
for their green innovation expenditures."

The project team recommends
that the policy instruments used to transform the energy system should always
be carefully coordinated and regarded as a whole package. The resulting policy mix
should be credible and as inherently consistent as possible – otherwise
uncertainties regarding future market development may result which hinder
investment and threaten the long-term competitiveness of Germany in these green
technologies. In practice this is not an easy task for policy making, given
dynamic developments, conflicting policy objectives and multiple interests. Monitoring
the German innovation climate can help to identify such developments at an
early stage. Dr. Christian Lutz from the GWS Osnabrück summarizes further
implications for policy makers: "On the one hand, in the supranational
context, climate and energy policy measures have to be much better coordinated.
On the other hand, the political discussion within Germany should more strongly
stress the resulting benefits like export opportunities, new jobs or stronger
international climate protection".

The energy and innovation
experts of the three research institutions also recommend that future studies
should further investigate the impacts of the policy mix on technological and
structural change. A database broadened accordingly could also be extended by
including other countries and technology sectors, which would require the
further development and combination of specific quantitative and qualitative research
methods. This should also clarify to what extent the policy instruments can be transferred
to other countries.

More information:

The Fraunhofer Institute for Systems and Innovation Research ISI
analyzes the origins and impacts of innovations. We research the short-
and long-term developments of innovation processes and the impacts of
new technologies and services on society. On this basis, we are able to
provide our clients from industry, politics and science with
recommendations for action and perspectives for key decisions. Our
expertise is founded on our scientific competence as well as an
interdisciplinary and systemic research approach.